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Obama's first budget plan forecasts $1.75 trillion deficit
(Agencies)
Updated: 2009-02-27 08:04
Then there is the proposed clampdown on the Pentagon budget, which would get a 4 percent boost, to $534 billion next year, but would then get increases of 2 percent or less over the next several years. Domestic programs favored by Democrats would, on average, receive a 7 percent boost over regularly appropriated levels -- even as many agencies are already swimming in cash from the just-enacted economic stimulus plan.
"It's going to be a tough row to hoe, but he has large Democratic majorities and a lot of popular support and we're in times of crisis," said Robert Reischauer, president of the Urban Institute. "So his prospects of him getting much of what he is seeking, while not good, are higher than ... we've seen in the past." Senate Budget Committee Chairman Kent Conrad, D-N.D., predicted Congress would pass much of Obama's plan, though with significant revisions. For instance, he's unimpressed with a proposal to reduce payments to farming operations with sales above $500,000 per year and says the plan to curb tax deductions for the wealthy faces uncertain prospects because of opposition from lawmakers from high tax states and universities whose endowments have shrunk. A plan to devote up to $250 billion to support as much as $750 billion in increased spending under the government's rescue program for banks and other financial institutions landed with a thud. Republicans scoffed at the idea that Obama's plan calls for much sacrifice on the spending front, citing the big increases for many agencies. they also pointed to tax increases and hundreds of billions in revenues from a contentious proposal to auction off permits for carbon emissions in a bid to address global warming. Obama and top aides emphasized that they didn't make the financial mess. Said the president: "We cannot lose sight of the long-run challenges that our country faces and that threaten our economic health -- specifically, the trillions of dollars of debt that we inherited, the rising costs of health care and the growing obligations of Social Security." "For too long, our budget has not told the whole truth about how precious tax dollars are spent," he said. "Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan. And that kind of dishonest accounting is not how you run your family budgets at home. It's not how your government should run its budgets either." Among the many programs that would receive generous boosts are education and cancer research. The size of education Pell Grants would automatically increase every year by inflation plus 1 percent, while Obama promises to double cancer research over several years. He also wants to put the United States on a path to double foreign aid. Obama's budget contains almost $1 trillion in tax hikes over 10 years on individuals making more than $200,000 and couples earning over $250,000. About $350 billion more would be raised through a variety of other hikes, including raising taxes on hedge-fund managers by taxing their compensation as income rather than at the 15 percent capital gains rate. Obama would also increase taxes on corporate income earned abroad. Some $526 billion in revenue from carbon pollution permits would be used to extend the "Making Work Pay" tax credit of $400 for individuals and $800 for couples beyond 2010 as provided in the just-passed economic stimulus bill. The budget would make permanent the expanded $2,500 tax credit for college expenses that was provided for two years in the just-passed economic stimulus bill. It also would renew most of the Bush tax cuts enacted in 2001 and 2003, and would permanently update the alternative minimum tax so that it would hit fewer middle- to upper-income taxpayers. Obama's $634 billion head start on expanding health care could easily double as lawmakers flesh out details in coming months on how to provide medical coverage to all of the 48 million Americans now uninsured while also trying to slow increases in costs. Health care costs now total $2.4 trillion a year and keep rising even as the economy is shrinking. Thursday's submission was an overview of a more comprehensive plan that will be submitted in April.
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